ICI Global says Dodd-Frank causing heavy burden

Dan Waters, the managing director of the new ICI Global trade body, recently attacked the Volcker Rule that financial regulators have designed in order to prevent banks from engaging in proprietary trading.

According to Waters, the rule could have a “more shocking impact” on European asset managers than the 2008 Fair and Accurate Credit Transactions Act, FinancialTimes.com reports.

The Volcker Rule is aimed at eliminating the chances for a government bailout of U.S. banks by banning them from engaging in risky activities, including proprietary trading and cutting back on their ownership of private equity and hedge funds.

U.S. mutual funds are considered “covered funds” and are exempted from the Volcker rule. Similar non-U.S. funds, however, including Ucits, Canadian mutual funds and Japanese investment trusts are not exempted, according to FinancialTimes.com.

ICI Global predicts that European or Asian banks may encounter severe restrictions in their ability to run mutual funds as a result of the rule.

“This has a much more draconian effect outside the U.S. than in the U.S., which can’t be right,” Waters said, FinancialTimes.com reports.

Waters also worried that the rue will impact “foreign banks that will never be bailed out by U.S. taxpayers,” according to FinancialTimes.com.

The current version of the Volcker Rule bars non-U.S. banks from branding Ucits funds with their name and prohibits them from owning a stake of more than three percent in a fund.